.d~~~ FY 2015, FY 2016, and FY Social Services Budget Committee

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1 FY 215, FY 216, and FY 217 Social Services Budget Committee Kansas Department of Health and Environment Division of Health and Health Care Finance Representative Lmda llagher Representative""#andy Garber d

2 _, ", ', House Budget Committee Report Agency: Kansas Department of Health and Environment Health and Health Care Finance Analyst: Mariani Expenditure Summary Operating Expenditures: State General Fund Other Funds Subtotal 1 1 j Bill No :, t Bill Sec Analysis Pg No 11 Budget Page No 22 Agency Estimate FY 215 i_ 764,183,58 1,552,639,17 2,316,822,597 Capital mprovements: " State General Fund ' Other Funds _::_ t Subtotal TOTAL 2,316,822,597 FTE positions, _ Non FTE Unci Perm Pos TOTAL ' Agency Estimate, i Governor House Budget 1 Recommendation Committee FY 215 Adjustments t,_, i 787,376,773 1,591,336, 18 2,378,712,881 Jr 1, 2,378,712, !' 4 (7, f The agency estimates operating expenditures for FY 215 of 23 billion, including 7642 million from the State General Fund and 71 million from the Children's nitiatives Fund (CF) The request is an all funds increase of 82 million, or 4 percent, a State General Fund increase of 383,794, or 1 percent, and a CF increase of 93, or less that 1 percent, above the amount approved by the 214 Legislature The all funds increase is largely due to an increase in other assistance for medical programs partially offset by a reduction in agency operating expenditures for contractual services The State General Fund increase is due to an increase in contractual services funding off set by a decrease in funding for salaries and wages 1, ' ' t tj \ _ i J lr1 ; i The budget includes 3545 FTE positions, a decrease of 57 FTE positions below, and 2749 nonfte unclassified positions, an increase of 392 nonfte unclassified positions above, the approved FY 215 number The agency states that due to the nature of its grant and federal funding it is replacing classified positions with nonfte unclassified positions The Governor's December allotment, which was applied after the agency submitted its budget request, reduced the agency's FY 215 approved amount for State General Fund by 1,34,93 in the agency operating expenditures for administration (642,928), aid to locals for Primary Care Safety Net Clinics (254,), PKU Treatment Program (1,93), the Office of the nspector General (36,262), and salaries and wages (33,688), J \'

3 _ f (_ 2 lt wfflt J ' t::, J = " J Governor's Recommendation '!, a 1\' ; L, _ 1 1 r' f, '""',J i _ i i!, The Governor recommends FY 215 operating expenditures of 24 billion, including 7874 million from the State General Fund, and 71 million from the Children's nitiatives Fund The recommendation is an all funds increase of 619 million, or 27 percent, a State General Fund increase of 232 million, or 3 percent, above the agency's revised estimate The Children's nitiatives Fund is the same as the agency's revised estimate The increase is largely attributable the addition of 632 million, including 242 million from the State General Fund to fully fund the November Human Services Consensus Caseload estimates ' " House Budget Committee Recommendation, =14 "' ' J 1 "' ' r, ll,,, r The Budget Committee concurs with the Gover or's recommendation! r ' ' 14 C J ' ' t l "t '" f, _, "t ;: T,r& ' r '" ) ' :A ( _ ;f J ll " 4 " ' ' ' r,_ i "' J ', J =, ' ll L : 'H,,,,, 11 ' r, ol J, t ' fi' 1, T f f"",' >li L : ', ) 4,"'rr "'l c, t ::4, f _,_ r= 1 ::_, 1 ' i ;_;f l =_ ' " Ll" ; ' ' " \' ' li " " i ::::,", "' _, [,, :' 11: " " : J ':: :_ ; ' r 1, ' 4 1 " " 1 ' 11 L' 1 r / "'J :,l', r! 1=/ l "

4 House Budget Committee Report Agency: Kansas Department of Health and Environment Health and Health Care Finance Bill No Bill Sec Analyst: Mariani Analysis Pg No Budget Page No 22 Agency Governor House Budget Request Recommendation Committee Expenditure Summary FY 216 FY 216 Adjustments Operating Expenditures: State General Fund 763,654, ,682,928 Other Funds 1,561,418,975 1,629,731,238 Subtotal 2,325,73,541 2,493,414,166 Capital mprovements: State General Fund Other Funds Subtotal TOTAL 2,325,73,541 2,493,414,166 FTE positions Non FTE Unci Perm Pos TOTAL Agency Request The agency requests operating expenditures for FY 216 of 23 billion, including 7637 million from the State General Fund, and 71 million from the Children's nitiatives Fund The request is an all funds increase of 83 million, or 4 percent, a State General Fund decrease of 529,14, or 1 percent, and a Children's nitiatives Fund decrease of 93, or less than 1 percent, from the FY 215 agency request The all funds increase is largely due to an increase in other assistance for medical programs and an increase in contractual services expenditures The State General Fund decrease is due to a reduction in agency operating expenditures in contractual services, commodities and capital outlay The budget includes 3422 FTE positions, a decrease of 123 FTE positions below, and 281 nonfte unclassified positions, an increase of 61 nonfte unclassified positions above, the FY 215 agency request Governor's Recommendation The Governor recommends FY 216 operating expenditures of 25 billion, including 8637 million from the State General Fund, and 71 million from the Children's nitiatives Fund The recommendation is an all funds increase of 1683 million, or 72 percent, and a State General Fund increase of 1 million, or 131 percent, above the agency request The Children's nitiatives Fund recommendation is the same as the agency request

5 2 The increase is largely attributable the addition of 1627 million, including 864 million from the State General Fund to fully fund the November Human Services Consensus Caseload estimates; the addition of 644 million, including 282 million from the State General Fund, as a result of the Managed Care Organization (MCO) privilege fee increasing from 1 percent to 55 percent; and an increase of 12 million, all from the State General Fund, to replace the Medical Program Fee Fund transfer to the State General Fund in FY 215 as part of the Governor's allotment plan The increases are partially offset by the reduction of 57 million, including 25 million from the State General Fund, for reduced expenditures due to policy changes in the KanCare Medical Program and the reduction of 13 million, all from the State General Fund, to continue the 4 percent reduction to Cabinet and other State General Funded agencies as part of the Governor's FY 215 allotment The Governor issued Executive Reorganization Order (ERO) No 43 to transfer the responsibility for Medicaid eligibility determination and associated employees from the Department for Children and Families to the Department of Health and Environment effective January 1, 216 The Governor indicates this reorganization is anticipated to increase accuracy in Medicaid eligibility determination and reduce program expenditures partially through uniform implementation of policy and processing changes These associated savings will be sprt between this Department and the Department for Aging and Disability Services n addition, ERO No 43 will transfer foster care licensing responsibilities from the Department of Health and Environment to the Department for Children and Families effective July 1, 215 The Governor indicates this reorganization is anticipated to streamline the licensing process House Budget Committee Recommendation The Budget Committee concurs with the Governor's recommendation with the following adjustments and notations: 1 Transfer 378, from the State General Fund operating expenditures account for administration to the State General Fund Aid to Local account for Primary Care Safety Net Clinics for FY Add language requiring the agency to submit a report regarding Reorganization Order (ERO) No 43 implementation and the transition of the eligibility responsibilities and staff effective January 216 The committee recommends the implementation be monitored and evaluated to determine whether the proposed changes were effective in decreasing the Medicaid eligibility Payment Error Rate Measurement (PERM) rates for Kansas The report should detail the findings and be reviewed by the 217 Legislature The Budget Committee further notes the Kansas Medicaid eligibility payment error rate is 128 percent while the national average is 33 percent The committee recommends the agency make improving the error rate and bringing the rate closer to the national average a priority focus 3 The Budget Committee requests that Legislative Post Audit conduct an audit of the Kansas Eligibility and Enforcement System (KEES) implementation by the Department of Health and Environment and other project partner agencies The committee notes the project i more than two years delayed from its original implementation schedule and the agency has already expended 935 million as of the September 3, 214 Cll1ef nformation Technology Office (CTO) Report

6 3 Contingent upon the passage of SB 7 or similar legislation by the 215 Legislature, the committee further notes an audit may be pursued under the newly created audit provisions 4 The Budget Committee notes the Governor's FY 216 recommendation for the agency includes reductions of 57 million, including 25 million from the State General Fund These reductions are based on anticipated savings from implementation of KanCare policy savings related to caseload cost reductions, Medicaid pharmacy administrative reforms, and Managed Care Organization (MCO) financial incentives for contracted providers The Committee is concerned the savings anticipated from the proposed policy changes will not be fully realized and the agency may not have adequate funding for entitlement services for FY 216

7 House Budget Committee Report Agency: Kansas Department of Health and Environment Bill No Bill Sec Health and Health Care Finance Analyst: Mariani Analysis Pg No Budget Page No 22 Agency Governor House Budget Request Recommendation Committee Expenditure Summary FY 217 FY 217 Adjustments Operating Expenditures: State General Fund 763,99, ,273,889 Other Funds 1,548, 735,154 1,571,657,476 Subtotal 2,312,725,971 2,455,931,365 Capital mprovements: State General Fund Other Funds Subtotal TOTAL 2,312,725,971 2,455,931,365 FTE positions Non FTE Unci Perm Pos TOTAL Agency Request The agency requests operating expenditures for FY 217 of 23 billion, including 764 million from the State General Fund and 71 million from the Children's nitiatives Fund The request is an all funds decrease of 123 million, or 5 percent, and a State General Fund increase of 336,251, or less than 1 percent, from the FY 216 agency request The Children's nitiatives Fund request is the same as the FY 216 agency request The all funds decrease is largely due to a reduction in contractual services expenditures partially offset by an increase in other assistance for medical program expenditures The request also reflects an increase in salaries and wages due to the 27th payroll expenditure which occurs in FY 217 The State General Fund increase is due to an increase in salary and wages and contractual services expenditures partially offset by a decrease in expenditures for capital outlay The budget includes 3412 FTE positions, a decrease of 1 FTE positions below, and 2818 non FTE unclassified positions, an increase of 8 nonfte unclassified positions above, the FY 216 agency request Governor's Recommendation The Governor recommends FY 217 operating expenditures of 25 billion, including 8843 million from the State General Fund and 71 million from the Children's nitiatives Fund The recommendation is an all funds increase of 1432 million, or 62 percent, and a State

8 2 General Fund increase of 123 million, or 157 percent, above the agency request The Children's nitiatives Fund recommendation is the same as the agency request The increase is largely attributable the addition of 1647 million, including 196 million from the State General Fund to fully fund the November Human Services Consensus Caseload estimates; addition of 666 million, including 293 million from the State General Fund, as a result of the Managed Care Organization (MCO) privilege fee increasing from 1 percent to 55 percent; and an increase of 21 million, all from the State General Fund, to replace the Medical Program Fee Fund transfer to the State General Fund in FY 215 as part of the Governor's allotment plan The increases are partially offset by the reduction of 57 million including 25 million from the State General Fund for reduced expenditures due to policy changes in the KanCare Medical Program; a decrease of 13 million, all from the State General Fund, for operating expenses to continue the 4 percent reduction to Cabinet and other State General Funded agencies as part of the Governor's FY 215 allotment; and the reduction of 295 million, including 13 million from the State General Fund, for an anticipated reduced Medicaid eligibility payment error ra e and associated savings The Governor issued Executive Reorganization Order (ERO) No 43 to transfer the responsibility for Medicaid eligibility determination and associated employees from the Department for Children and Families to the Department of Health and Environment effective January 1, 216 The Governor indicates this reorganization is anticipated to increase accuracy in Medicaid eligibility determination and reduce program expenditures partially through uniform implementation of policy and processing changes These associated savings will be split between this Department and the Department for Aging and Disability Services n addition, ERO No 43 will transfer foster care licensing responsibilities from the Department of Health and Environment to the Department for Children and Families effective July 1, 215 The Governor indicates this reorganization is anticipated to streamline the licensing process House Budget Committee Recommendation The Budget Committee concurs with the Governor's recommendation w'th the following adjustments: 1 Transfer 378, from the State General Fund operating expenditures account for administration to the State General Fund Aid to Local account for Primary Care Safety Net Clinics for FY Add language requiring the agency to submit a report regarding Reorganization Order (ERO) No 43 implementation and the transition of the eligibility responsibilities and staff effective January 216 The committee recommends the implementation be monitored and evaluated to determine whether the proposed changes were effective in decreasing the Medicaid eligibility Payment Error Rate Measurement (PERM) rates for Kansas The report should detail the findings and be reviewed by the 217 Legislature The Budget Committee further notes the Kansas Medicaid eligibility payment error rate is 128 percent while the national average is 33 percent The committee recommends the agency make improving the error rate and bringing the rate closer to the national average a priority focus

9 3 3 The Budget Committee notes the FY 217 Governor's recommendation for the agency includes reductions of 865 million, including 38 million from the State General Fund These reductions are based on anticipated savings from implementation of KanCare policy changes related to caseload cost reductions, Medicaid pharmacy administrative reforms, Managed Care Organization (MCO) financial incentives for contracted providers, and improvement of the Payment Error Rate Management (PERM) The Committee is concerned the the projected savings from the proposed policy changes will not be realized and the agency may not have adequate funding for entitlement services for FY 217